U.S. Stocks Close Lower as Strong Jobs Report Bolsters Fed Rate Hike Bets

U.S. stocks ended the week on a down note Friday after a robust August employment report significantly outpaced economists' forecasts, reinforcing investor expectations for a more hawkish Federal Reserve. The data sparked a sell-off in Treasuries, sending yields higher and strengthening the U.S. dollar.

Despite Friday's losses, the S&P 500 and Nasdaq Composite finished the week with modest gains of 0.1% and 0.4%, respectively. The Dow Jones Industrial Average posted a weekly loss of 0.3%. U.S. markets will be closed Monday for a holiday.

Hot Labor Market Fuels Rate Hike Fears

The U.S. economy added 162,000 nonfarm payrolls in August, far exceeding the 53,000 consensus estimate from economists surveyed by Dow Jones. The unemployment rate held steady at 4.1%, in line with expectations, while job figures for June and July were also revised higher, painting a picture of a resilient labor market.

The strong data intensified the view that the economy can withstand higher interest rates, giving the Federal Reserve more leeway to continue its fight against inflation. Underscoring this sentiment, Fed official Hamake said Friday that current monetary policy is not restrictive enough and that it is "time to take action," according to Zhitong Finance App.

Markets React to Shifting Outlook

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On Friday, the Dow Jones Industrial Average fell 272.51 points, or 0.51%, to close at 53,413.60. The S&P 500 shed 29.29 points, or 0.38%, to 7,718.42, and the Nasdaq Composite declined 77.07 points, or 0.29%, to 26,506.99.

In the bond market, the prospect of higher rates pushed Treasury yields upward. The 2-year Treasury yield, which is highly sensitive to Fed policy expectations, climbed to its highest level since early 2025. The U.S. Dollar Index rose 0.27%, while spot gold prices fell nearly 1%.

Sector and Stock-Specific Moves

While major technology stocks declined, with Apple (AAPL) falling 2.51% and Microsoft (MSFT) down 2.04%, the semiconductor and AI-related sectors showed notable strength.

• AI & Chips Rally: SanDisk (SNDK) surged 11.9%, also boosted by news of its inclusion in the S&P 100 index. Other chipmakers followed, with SK Hynix (SKHY) gaining 8.14% and Micron Technology (MU) rising 6.1%.
• Tesla Slides: Shares of Tesla (TSLA) dropped 5.92% after a highly anticipated update on its "Cybercab" robotaxi service failed to impress investors, raising concerns about its competitive standing.
• China Stocks Advance: The Nasdaq Golden Dragon China Index rose 0.89%, with Baidu (BIDU) climbing 4.07% and Alibaba (BABA) adding 1.26%.